Let Gregory James Company, Inc. help you learn if you can get rid of your PMI
A 20% down payment is usually accepted when buying a house. Because the liability for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value variationsin the event a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than the balance of the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they secure the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers keep from bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy home owners can get off the hook a little earlier.
It can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home could have secured equity before things cooled off.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Gregory James Company, Inc., we know when property values have risen or declined. We're masters at determining value trends in Cedartown, Polk County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: